HBOS 'considering £9bn bid for Abbey National'

Banking group HBOS is mulling a possible £9bn (€13.6bn) counter-bid for takeover target Abbey National, it was reported today.

HBOS has a team looking at the benefits and disadvantages of bidding for Abbey, which last week agreed an £8.5bn (€12.9bn) merger with Spain’s biggest bank, Banco Santander Central Hispano (BSCH), a national Sunday newspaper reported.

Abbey’s shareholders had sent “a clear message” that they wanted to see an offer from HBOS, the newspaper cited an executive with a close knowledge of HBOS as saying.

A spokesman for HBOS refused to comment on the report in today’s Sunday Telegraph.

“We don’t comment on market speculation or rumours,” he said.

BSCH and Abbey both hailed last week’s deal, which is expected to result in Europe’s biggest cross-border banking takeover.

The UK’s second largest mortgage provider, which is undergoing a three year overhaul, said the proposed tie-up was necessary to accelerate its own recovery.

BSCH said the acquisition would be an “excellent entry” into the UK market and pledged to drive sales from better use of Abbey’s 741-strong branch network and from modernisation of the company’s IT network.

However, the announcement got a lukewarm response from BSCH shareholders and analysts and investors in the UK also expressed reservations, particularly as shareholders face the prospect of holding shares in a euro denominated company.

Today’s report quoted the executive with close knowledge of HBOS as saying that big institutions with stakes in Abbey did not want Santander’s shares.

“They would much rather see an all-UK deal funded by our shares,” the executive said.

The report added that competition experts had told HBOS that it may be the only substantial UK bank that regulators would allow to take over Abbey.

Abbey has attracted interest from National Australia Bank and Bank of Ireland in the past, while Lloyds TSB was blocked by competition authorities from completing an £18bn (€27.3bn) takeover in 2001.

The Halifax and Bank of Scotland merged to form HBOS in September 2001.